Commodity trader Olam International is seeing better days with a solid set of second-quarter earnings to show for it.
The group posted a 20 per cent jump in net profit to $114.9 million for the three months ended June 30, up on the restated $95.8 million in the same period a year ago, thanks to a stronger performance in its overall food business.
Revenue climbed 3.5 per cent to $5 billion, backed by a 19.9 per cent growth in sales volumes across most segments, although it was capped by lower prices of certain commodities, said Olam yesterday.
Lower finance expenses, which came down by 10.9 per cent to $98.3 million due to various initiatives to optimise loan tenures and reduce borrowing costs, also contributed to a stronger bottom line.
Net profit soared 73 per cent to $228.6 million for the half year while revenue rose 6.7 per cent to $9.74 billion. Earnings per share for the quarter came in at four cents, up on the restated 3.76 cents previously, while net asset value per share stood at 165.01 cents as at June 30, down from the restated 179.75 cents as at December 31 last year.
Olam has declared an interim dividend of three cents per share, higher than the 2.5 cents previously.
AT A GLANCE
$114.9 million (+20%)
$5 billion (+3.5%)
DIVIDEND PER SHARE:
3 cents (+20%)
The firm, which counts Singapore state investor Temasek Holdings and Japan's Mitsubishi Corporation as its largest shareholders, is a major player in the markets of a number of commodities, including cocoa, coffee and edible nuts.
Group chief executive Sunny Verghese told a briefing yesterday that the group's joint venture with Mitsubishi Corp, MC Agri Alliance, is expected to commence operations by Oct 1. The new entity will import and distribute coffee, cocoa, sesame, edible nuts, spices, vegetable ingredients and tomato products for the Japanese market.
"We hope... to be able to significantly increase our market share in the Japanese market," he said, adding that MC Agri Alliance is also looking to make other investments in Japan that will "contribute to the domestic food story".
Besides the joint venture, Mr Verghese said the group is looking to generate value from its other recent initiatives, including the flour and pasta manufacturing facilities in Nigeria and its enlarged peanut shelling business in the US.
That said, he acknowledged that sluggish global growth continues to be a challenge. "We operate in 70 countries, and ... every one of these countries is seeing growth challenges. Olam, as you know, is very diversified, so I think we will be in a better position to manage some of this volatility, but we will not be immune to some of these headwinds," Mr Verghese said.
He expects the slowdown to have some impact on the resources sector. Olam's cotton and rubber businesses will likely underperform for the rest of the year, but the food business, as a whole, will remain stable.
"We remain confident that we have built a diversified, well-balanced business and that we will perform reasonably well."
Olam shares closed half a cent or 0.3 per cent lower at $1.85 yesterday, after the results were released.